Back to black: British Airways back in profit for first time in two years, making £158m

Back to black: BA chief executive Willie Walsh today announced the airline's first profit in two years

British Airways today announced its first profit in two years after hiking up fare prices.

Chief executive Willie Walsh said the airline had 'turned a corner' after posting a pre-tax surplus of £158million, despite disruption to flights from strikes and the Icelandic ash cloud.

The figure, for the six months to September 30, is more than double the £73 million that had been expected by
analysts. The last time the company reported a half-year profit was in
the six months ending September 2008.

Mr Walsh said: 'The changes we have made to our cost base are now
having a big impact
on the business.

'I'm pleased with the results today - they
demonstrate that the action we have taken has been the right decision
for the business. The figures speak for themselves.'

The figures were posted just days before huge rises in Air Passenger Duty are due to come into effect.

The Airport tax will leap by up to 55 per cent from Monday, adding hundreds of pounds to the cost of family holidays abroad.

BA said in its results statement that high flight taxes put 'aviation's social and economic benefits at risk'.

Asked whether the airlines would be prepared to take on the tax burden, Mr Walsh told Sky News this morning: 'No. We can't afford to take on the tax burden.

RELATED ARTICLES

Share this article

'We're talking about paying almost £450 million on an annual basis to the Exchequer through this tax.

'That's £450 million that British Airways does not have. I don't believe easyJet has the money to pay this tax and take it on.

Talks: BA is still to resolve its year-long dispute with cabin crew, although Mr Walsh said a new productivity deal had been agreed with Heathrow staff

'These are very significant tax burdens that need to be addressed by the
Government if we are to contribute to the economic recovery that
everybody wants to see.'

BA - which has yet to resolve its year-long dispute with cabin crew -
increased its sales for the six months from 8.4 per cent to £4.4 billion
despite passenger numbers falling by 6.2 per cent.

They picked up towards the
end of the period with a 4.3 per cent increase in September.

Operating costs were cut by 1.5 per cent even though fuel costs went up by 2.4 per cent in the period.

In the first quarter BA recorded a loss of £164 million, but profits of £322 million in the second quarter, which included the busy summer holiday season, helped to pull the half-year back into the black.

BA expects the economic recovery to continue and announced plans to increase capacity by up to five per cent next year.

While the half-year has seen improvements for BA, there are still staff issues hanging over the group.

However, Mr Walsh said the first cabin crew hired under new terms would start work next week and a new productivity deal had been agreed with Heathrow staff.

The new arrangement with pilots, air terminal staff and engineers helped reduce staff costs by 2.7 per cent to £1bn in the half-year.

Some cabin crew are still resisting pay changes but the number of staff
on board flights has been reduced and cabin staff have been recruited on
new terms and conditions which are due to start on Monday.

Mr Walsh has previously assured passengers the airline is ready to fly a near-full service in the event of another strike.

BA's long-awaited merger deal with Iberia to create International Airlines Group is also on the horizon, with shareholder documents this week showing the tie-up should complete in January if it receives shareholder approval.

The two airlines would retain their own brands, but the initiative will save them 400 million euros (£348.2m) a year by its fifth year.

It also recently sealed its three-way trans-Atlantic business link-up with American Airlines and Iberia.

'The challenge we faced was one of structural cost difference between us and our competitors,' added Mr Walsh. 'We are also benefiting from an improved economy, which we hope will pick up in 2011. We don't see any evidence to support a double dip.'

In April, an ash cloud from the erupting Eyjafjallajoekull volcano in
Iceland grounded flights in the UK and across Europe for several days.